H. J. Heinz Company NYSE (HNZ)(Current: $72.10, Up by 0.08%) announced last Wednesday it will be hosting a special shareholder meeting on April 30. The plan is to allow investors voting of the $28 billion acquisition and $212.6 million golden parachute for CEO William Johnson. The $28 billion buyout by Warren Buffett's Berkshire Hathaway (BRK.B) and 3G Capital Management has been the biggest deal in the food services industry to date. H. J. Heinz has a market cap of $23.13 billion and is part of the consumer goods sector. H. J. Heinz current operating margin stands at 18 percent. Organic sales growth is expected during second half of FY 2013. The last 5 years of H. J. Heinz have a return-on-equity of 31.7%. H. J. Heinz has 40.9% annual growth in emerging markets and 59% market share in the U.S.
CEO William Johnson is eligible for a $212.6 million golden parachute after the $28 billion buyout last month. The filing states Johnson owned 2.1 million shares of H.J Heinz stock as of Feb. 28. The stock values assume a $72.50 sales price agreed to buy the company, less the price he paid to exercise the option. The $72.50-a-share buyout is the largest food acquisition on record:
said spokesman Michael Mullen. William Johnson accumulated over his 30-year career a compensation equity before the merger announcement.
H. J. Heinz next strategic plans are to invest in emerging markets, marketing an SAP program and ongoing cost saving efforts. The long term outlook looks good for HNZ investors, given the company has a strong brand portfolio, poised at continued aggressive growth in emerging markets. H. J. Heinz presently generates strong growth rates in India, China and Indonesia deriving 20% of its revenue from emerging markets. The company completed several past acquisitions including Brazilian company Coniexpress (2011) and Chinese soy sauce maker Foodstar Holding (2010). H. J. Heinz is a leader in the North American market with products sold in more than 200 countries globally.
FY 2012 acquisitions in Brazil and China Emerging Markets for H. J. Heinz generated more than 20% of the company's total sales, up from 16% in FY 2011. The strategy is a successful "buy and build" business model where H.J Heinz acquired developed strong local brands and businesses in the key markets of China, India, Indonesia, Russia, Poland and now Brazil.
New challenges have recently developed for H. J. Heinz. Investors question the problem areas centered around the company's ability to control input costs. Investors have also negatively went after the recent takeover of H.J. Heinz by Berkshire Hathaway and 3G Capital Management stating insiders are at fault and cost the expense of shareholders through an "unfair process." The investors were probed by the FBI on trading anomalies where the SEC opened federal investigation. Two federal shareholder lawsuits were filed in Pittsburgh Feb. 15, the day after the takeover was announced. Agriculture product prices are on the rise and forced H. J. Heinz to protect its margin. There are also expected pressures stemming from last year's drought. The company is still on par to expect organic sales growth this year.
H.J. Heinz is still the strongest of its competitors in operating margin growth. The company is also an industry leader in terms of Price/Earnings to Growth ratio, return on equity and long-term growth rate. Competitors include Campbell Soup Co. (CPB) and ConAgra Foods Inc. (CAG).
Those who own H. J. Heinz that have sold stock too early have missed out on the largest profits. The largest stockholders will reap the highest returns. Blackrock Inc. holds about 23.6 million shares for itself, Blackrock Inc. investment clients presently at a 7.37 percent stake. The Vanguard Group Inc. holds a 4.38 percent stake and The Bank of New York Mellon Corp a 3.83 percent stake. Many shares are held from these companies for institutional and individual investors.
Investors outlook are still content. Merger funds are expected to return about 4% to 5% FY 2013. Warren Buffett's offers such as H. J. Heinz are ones that are not likely to be renegotiated. Buffett and H. J. Heinz can be tracked together as early as 1980. H. J. Heinz has been a consistent stock since then. Dividend growth is expected to drive the company forward after it goes private. H. J. Heinz has held strong stock price performance, revenue growth, cash flow, expanding profit margins and return on equity. With much more to come, H. J. Heinz is now at a premium to be poised for even stronger valuation.